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Texas Cities Go To Court Over State Law They Say Loses Them Millions

City of San Antonio
Small-cell nodes mounted on city-owned traffic signals in San Antonio. Small-cell can be used for 4G or 5G. San Antonio has worked to eliminate cabinets like the ones pictured by incorporating them into recycling bins and other infrastructure

AT&T, Verizon, T-mobile and other companies are building out their 5G networks — and much of it will be on public property. Texas cities are losing out on hundreds of millions of dollars as a result according to the Texas Muncipal League.

Fifty-seven cities across Texas are suing the state to change the law that made it possible for the money to stay in the pockets of big telecoms.

Back In 2017, Texas was considering Senate Bill 1004. It would limit the power of cities to control what went on city-owned light poles as well as their ability to collect rents for the public's rights-of-way.

A right-of-way is a public easement used for transportation, like a road.

Related | Federal Lawsuit Over 5G ‘Land Grab’ Has Texas Roots

It’s goal was to make it cheaper and easier for telecommunications companies to rollout 5G, the next generation of wireless technology. Telecoms were pushing state lawmakers and federal officials to streamline the process, despite the 5G standards not being agreed upon at that time.

While at a 2017 Texas Senate business and commerce public hearing, AT&T’s Ryan Tidwell said telecoms needed tools like 5G right away, “to keep up with the customers data demand in our network. Wireless consumption has increased over 250,000% in the last decade alone, and it's not slowing down anytime soon.”

These networks need exponentially more transmitters or small-cell nodes to make 5G work, so companies wanted to use city poles and rights-of-way, rather than negotiate with exponentially more private property owners just a few feet over from the right-of-way. 

San Antonio, Houston and Dallas had already negotiated rental rates with some providers ranging from $1,000 to $2,500 per small-cell node. But then providers decided not only did they not want to pay $2,500 per node, they didn’t even want to pay 10% of that, the rate set by S.B. 1004. 

“We believe that the $250 rate per node is still much higher than necessary to compensate cities for their cost of managing the public right of way for these minor incursions,” said Richard Lawson, who represented Verizon at the same 2017 hearing.

Some companies like Crown Castle had rolled out small networks in places like Dallas, which — after changing the rates a few times — had settled on a yearly rate of $1,000 per node, and other one-time fees.

“Those fees may not sound like much, but to give you an idea this would result in annual license fees. Nearly $275,000 for this small network on top of permitting fees that were $40,000 unfortunately that makes the network infeasible,” said Robert Millar, counsel for Crown Castle.

Credit State of Texas
Robert Millar, associate counsel for Crown Castle, testifying at a Texas Senate business and commerce committee hearing 3.21.17

“The flip side of that is, ‘So, you’re saying the only way you can make money is if the public subsidizes your business plan.’ That tells me you don’t have a viable business plan,” said Don Knight, Dallas assistant city attorney.

Over the objections of cities, the bill passed into law in 2017. Then in 2019 another bill passed that eliminated rental rates in the rights-of-way for cable providers who provide phones over the same line. They would have to pay the higher of the two. Rather than unrealized monies, this was now eating into city budgets. San Antonio has lost $7.3 million as a result of the cable bill, according to city staff.

San Antonio and Austin are the latest cities joining 55 others in a lawsuit that challenges both laws. None of the providers nor Sen. Kelly Hancock, who wrote both bills, commented on this story, despite TPR’s inquiries. 

Dallas estimated it will lose more than $20 million in revenue every year from an estimated 10,000 small cell nodes, according to Knight. 

“And that’s not a permitting fee, that’s a ‘You’re using our property that belongs to the public, and we are required by the Texas constitution to get full value for that,’” said Knight.

The Texas constitution has strong anti-gift and debt provisions, said Knight, because in the 1870s, railroad companies would enlist city governments to take out loans on its behalf to buy property for the company. The railroad was a pretty revolutionary technology at the time, and cities wanted them nearby. But then the company would go bankrupt, skip town and leave cities holding the debt.

Now fast forward 150 years and, Knight said, big telecoms are making a similar argument.

But the money isn’t the only thing cities are smarting over. Austin Stevenson, in the McAllen city attorney’s office, said they have little control over their rights-of-way as a result. 

“I’d say about 98% of the power is with providers,” he said.

Aside from some residential restrictions and some design restrictions for historic areas, telecoms can build new poles or attach to city poles pretty much anywhere, he said. 

New poles may not end up in people’s front yards, but when a large power cabinet — which is needed to run 5G —  is dropped on in a homeowners yard, they get in touch. 

“And so that's what we've seen. As there have been citizens that call us and say ‘What is going on?’ And they're usually irate during the first 30 seconds of the phone call until we can explain the situation. And then they become our ally and advocate,” said Stevenson.

McAllen is also suing the state, but at the end of the day cities still want the technology. They want their residents to be part of this advancement. That’s why many like McAllen and San Antonio have streamlined their processes to address permits quickly. 

“So, even though we disagree with a law, we're still trying to aid in the deployment of this technology within the city. And we want it to be deployed. We don't want to be left behind,” Stevenson said. 

Texas Cities are scheduled to go to court against the state on the issue Feb. 18.

Paul Flahive can be reached at Paul@tpr.org or at Twitter @paulflahive.

Paul Flahive can be reached at Paul@tpr.org and on Twitter at @paulflahive